Navigating Home Buying in a High Interest Rate Environment

House hunters looking for a new home have become increasingly worried since a perfect storm hit this year to push the dream of home ownership out of reach for many.

Rapidly rising interest rates hit a 13-year high of 5.2% amid soaring inflation, and tight housing markets were compounded by international unrest, housing shortages supply, short-term economic uncertainty and stock market volatility. , according to economists.

This is starting to scare off potential buyers. The drop in median existing home sales and mortgage applications reflects people’s uncertainty or that the purchase has simply been ripped off just beyond their reach.

In April, sales of existing homes fell 2% from the previous month and 5.9% from a year ago, according to the May 19 report from the National Association of Realtors. Demand for existing home sales fell for the third consecutive month this year, the association noted in a May 19 news release. The day before, the Mortgage Bankers Association reported that home mortgages fell 11% from the previous week, according to its May 18 press release.

The storm is slowing New York’s recent white-hot housing market, hitting broker confidence, which fell for a third straight quarter, and weakening brokers’ outlook for the rest of the year, the Real Estate Board of New York, the main realtor for the city’s real estate trade association, reported on May 16.

To buy or not to buy?

Those issues, along with rising costs, aren’t stopping some buyers from buying, and neither should they, mortgage lender Donald Sharpe told Gay City News.

As a loan originator, Sharpe helps people become homeowners, from the application process to closing on their dream home.

The 64-year-old gay senior loan officer from Movement Mortgage has seen it all in his 35-year career in the mortgage industry. The federal government’s interest rate hike and the next and final one for 2022 — coming in June — aren’t the highest rates he’s seen in his career, he said.

“I just advise people not to get caught up in the fever,” Sharpe said. “Only buy something that seems reasonable.”

Reasonable for him looks at the big picture. Last week’s 5.2% interest rate hike on a 20-year, 30-year fixed-rate mortgage isn’t as big as it could be and has been by the past.

” Never [is the current interest rate] at the highest of all,” he said, noting that during his career there have been many years when interest rates have been 6% and 7%.

“People will continue to buy homes in virtually any interest rate market,” he said, particularly when comparing the cost and value of renting versus the property. “Rent prices are very high all over the country,” so “anytime is a good time to buy. It’s not really cheaper to buy a house than it’s ever been, but compared to how much you would have to pay for rent, that makes it more reasonable.

Even when interest rates fall, house prices will have risen, he said.

He also thinks buyers need to consider that they are “not marrying the payment”.

There’s a bet the payment could be higher than the rent the buyer is currently paying, he said, but the odds are good the home will be refinanced at a lower payment at some point. The upside is “you will have owned it before” and the house would have appreciated it.

Sharpe also pointed out that many buyers don’t consider tax deductions and government grants to help people buy homes. They also don’t see paying for the house as the largest expense compared to other expenses, such as repairs and renovations, that come with home ownership, he added. .

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Sharpe entered the mortgage business in his mid-twenties in 1987. The independent mortgage company that handled his mortgage for his first home offered him a position in Tampa, Florida.

“It ended up working out really well,” said Sharpe, who eventually owned her own mortgage company for 20 years and worked in Georgia, Illinois, Texas and California. He sold the company to his employees in 2010 and took a three-year sabbatical to recover from the 2008 property crash.

Several years later, he moved to New York to pursue his dream of living in the city and reinventing himself as a real estate agent. Soon the mortgage companies started knocking on his door. Sharpe works with real estate agents to help clients find the mortgage that’s right for them.

“I finally gave in to the lure of the siren song of the mortgage industry, which I had really loved,” he said.

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